Anadarko Basin Seismic Operations Agreement Ii

ANADARKO BASIN
SEISMIC OPERATIONS AGREEMENT II


This Anadarko Basin Seismic Operations Agreement II (this "Agreement") is dated effective as of the 1st day of April, 1997, and is by and between BRIGHAM OIL & GAS, L.P. ("BOG") and VERITAS DGC LAND, INC. ("Veritas") (BOG and Veritas being sometimes individually referred to herein as a "Party" and collectively referred to herein as the "Parties");


WHEREAS, BOG and Veritas Geophysical, Ltd. (being the predecessor in interest to Veritas) entered into that certain Anadarko Basin Seismic Operations Agreement dated February 15, 1996 (the "Previous Agreement") providing for Veritas' acquisition of 3-D seismic operations for BOG within the areas described therein; and


WHEREAS, BOG has designated the last project area within which Veritas is to perform 3-D seismic operations for BOG under the Previous Agreement and that the Previous Agreement shall terminate by its own terms upon the completion of Veritas' 3-D seismic operations for such last project area; and


WHEREAS, BOG has identified a number of additional project areas within the lands described in Exhibit A which is attached hereto and incorporated herein for all purposes (the lands described in Exhibit A being hereinafter referred to as the "Alliance Area"), within which BOG desires to pursue oil and gas exploration and/or development operations with project participants; and


WHEREAS, BOG desires to have Veritas to continue to conduct three-dimensional seismic operations within the Alliance Area as provided in this Agreement; and


WHEREAS, Veritas desires to perform such three-dimensional seismic operations within the Alliance Area pursuant to the terms set forth in this Agreement;


NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:


ARTICLE I.
RELATIONSHIP OF PARTIES
AND EFFECT UPON PREVIOUS AGREEMENT


Section 1.1. No Partnership. The liabilities of the Parties hereunder shall be several, not joint or collective. It is not the intention of the Parties to create, nor shall this Agreement be deemed as creating, a mining, tax or other partnership or association or to render the Parties liable as partners. However, if for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each Party thereby affected elects to be excluded from the application of all of the provisions of Subchapter "K," Chapter 1, Subtitle "A," of the Internal Revenue Code of 1986, as amended (hereinafter referred to as the "Code"), as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder. Should there be any requirement that each Party hereby affected give further evidence of this election, each such Party shall execute such documents and furnish such other evidence as may be required by the Federal Internal Revenue Service or as may be necessary to evidence this election. No Party shall give any notice or take any other action inconsistent with the election made hereby. In making the foregoing election, each Party states that the income derived by such Party from operations hereunder can be adequately determined without the computation of partnership taxable income.


Section 1.2. Effect Upon Previous Agreement. The Parties recognize and agree that, except as provided in Section 3.6 below this Agreement shall not effect the Parties' rights and responsibilities under the Previous Agreement and the Parties' rights and responsibilities with respect to the 3-D operations which were conducted under and pursuant to the Previous Agreement shall be governed solely by the Previous Agreement. Similarly, except as provided in Section 3.6 below the Previous Agreement shall not effect or in any way apply to the 3-D operations which are conducted pursuant to the terms of this Agreement. 2
ARTICLE II.
CONDUCT OF SEISMIC OPERATIONS


Section 2.1.BOG Project Areas. The Parties recognize and acknowledge that BOG will be designating geographic areas within the Alliance Area (the separate geographic areas being herein referred to as "Project Areas") for the conduct of three-dimensional seismic operations (hereinafter referred to as "3-D Operations") hereunder for the benefit of BOG and its participants. For purposes of this Agreement BOG's participants (hereinafter referred to as "BOG Participants") shall mean (i) those parties that have entered into an agreement with BOG providing for such parties' joint participation with BOG in an entire Project Area, and (ii) those entities in which BOG either owns more than fifty one percent (51%) of the ownership equity in such entity or controls the day to day operations of such entity. The Parties recognize and acknowledge that third parties that enter into agreements with BOG under which such parties either assign or are assigned interests covering less than an entire Project Area are not BOG Participants for purposes of this Agreement. For example, in the event that BOG simply enters into a farm-in agreement with the owner of an oil and gas leasehold estate covering less than an entire Project Area, such party will not be considered a BOG Participant for purposes of this Agreement.


Section 2.2. BOG Commitment to 1000 Square Miles.


A. Subject to the other terms and provisions which are contained in this Agreement, within a period of thirty-six months (to be reduced to twenty-two months in the event that Veritas gives the notice described in Section 2.6 below) of the date on which Veritas commences field seismic acquisition operations for the first Project Area which is the subject of this Agreement (such time period being hereinafter referred to as the "Agreement Term"), BOG agrees to utilize a Veritas seismic crew (hereinafter referred to as the "Alliance Seismic Crew") to conduct 3-D Operations within Project Areas covering a total of at least one thousand square miles (to be reduced to five hundred square miles in the event that Veritas gives the notice described in Section 2.6 below) within the Alliance Area (such number of square miles to be covered by 3-D Operations under this Agreement being hereinafter referred to as the "Contract Mileage"); provided, however, that at BOG's option the Agreement Term shall be extended for any days during which the Alliance Seismic Crew does not conduct operations hereunder due to weather conditions or any other causes which are not the fault of BOG. The Parties recognize and acknowledge that in order to complete 3-D Operations across the entire final Project Area which is to be shot pursuant to the terms of this Agreement, at BOG's option, the Contract Mileage may be increased in size, provided that it is not increased by more than one hundred square miles without Veritas' consent. The Parties also agree that two Alliance Seismic Crews shall be utilized simultaneously to conduct the field seismic operations for the first two Project Areas which are the subject of this Agreement and that upon the Parties' mutual agreement, two Alliance Seismic Crews may be utilized simultaneously at other times during the Agreement term to conduct field seismic acquisition operations within the Project Areas.


B. For purposes of this Agreement the number of square miles which are covered by the 3-D Operations shall be determined by the total number of source and receiver points which are shot as part of the 3-D Operation for the Project Area.


(i) For the 1,320' receiver line spacing parameters one hundred
ninety two total source and receiver points shall be deemed to be one
square mile; provided, however, that in the event that the total
number of receiver points are greater than fifty-one percent of the
total source and receiver points for any Project Area, any receiver
points exceeding such fifty-one percent amount shall not be counted
for purposes of determining the number of square miles covered by the
3-D Operations, and in the event that the total number of source
points are greater than fifty-one percent of the total source and
receiver points for the Project Area, any source points exceeding such
fifty-one percent amount shall not be counted for purposes of
determining the number of square miles covered by the 3-D Operations.
However, in the event that the total number of receiver points exceed
fifty-one percent of the total source and receiver points for a
Project Area and BOG approves such excess receiver points, though
those excessive receiver points will not be


Anadarko Basin Seismic Operations Agreement II 2 3
counted for purposes of determining the number of square miles which
are covered by the 3-D Operations, BOG shall be charged for the number
of receiver points exceeding such fifty-one percent of total points at
a rate of sixty-seven dollars ($67.00) per additional receiver point.
In the event that the total number of source points exceed fifty-one
percent of the total source and receiver points for a Project Area and
BOG approves such excessive source points, though those excessive
source points will not be counted for purposes of determining the
number of square miles which are covered by the 3-D Operations, BOG
shall be charged for the number of source points exceeding such
fifty-one percent of total points at a rate of one hundred twelve
dollars ($112.00) per additional source point. In the event that
Veritas must cable around a tract that is to be excluded from the 3-D
Operations and the amount of cable which is utilized to cable around
such tract would normally have more than five receiver points on it,
then the number of receiver points along the cable length which is
used to cable around such tract shall be counted as receiver points
for purposes of determining the number of square miles which are
covered by the 3-D Operations.


(ii) For the 660' receiver line spacing parameters two hundred
eighty-eight total source and receiver points shall be deemed to be
one square mile; provided, however, that in the event that the total
number of receiver points are greater than sixty-seven and one-half
percent of the total source and receiver points for any Project Area,
any receiver points exceeding such sixty-seven and one-half percent
amount shall not be counted for purposes of determining the number of
square miles covered by the 3-D Operations, and in the event that the
total number of source points are greater than sixty-seven and
one-half percent of the total points for the Project Area, any source
points exceeding such sixty-seven and one-half percent amount shall
not be counted for purposes of determining the number of square miles
covered by the 3-D Operations. However, in the event that the total
number of receiver points exceed sixty-seven and one-half percent of
the total source and receiver points for a Project Area and BOG
approves such excess receiver points, though those excessive receiver
points will not be counted for purposes of determining the number of
square miles which are covered by the 3-D Operations, BOG shall be
charged for the number of receiver points exceeding such sixty-seven
and one-half percent of total points at a rate of seventy-nine dollars
($79.00) per additional receiver point. In the event that the total
number of source points exceed sixty-seven and one-half percent of the
total source and receiver points for a Project Area and BOG approves
such excessive source points, though those excessive source points
will not be counted for purposes of determining the number of square
miles which are covered by the 3-D Operations, BOG shall be charged
for the number of source points exceeding such sixty-seven and
one-half percent of total points at a rate of one hundred thirty-two
dollars ($132.00) per additional source point. In the event that
Veritas must cable around a tract that is to be excluded from the 3-D
Operations and the amount of cable which is utilized to cable around
such tract would normally have more than five receiver points on it,
then the number of receiver points along the cable length which is
used to cable around such tract shall be counted as receiver points
for purposes of determining the number of square miles which are
covered by the 3-D Operations.


Section 2.3. Parameters and Equipment. For each Project Area BOG shall select: 1) the seismic parameters that are to be utilized for the 3-D Operations to be conducted within such Project Area from the parameters which are set forth in Exhibit D; and 2) the equipment which is to be utilized for the 3-D Operations to be conducted within such Project Area from the equipment list which is set forth in Exhibit E. However, if for any Project Area BOG desires to utilize parameters other than those which are set forth in Exhibit D or equipment other than that which is listed in Exhibit E, BOG and Veritas shall attempt to mutually agree upon the reasonable charges to be incurred for such parameters or equipment. Should the Parties fail to reach agreement on such charges, such Project Area shall be removed from this Agreement and shall not be considered part of the Contract Mileage which is set forth in this Agreement; such Contract Mileage commitment amount shall not, however, be reduced as the result of any such removal of a Project Area.


Anadarko Basin Seismic Operations Agreement II 3 4
Section 2.4. Notification of Project Area Outline and Parameters and Equipment. No less than twenty-one days prior to the expected commencement of the field seismic acquisition operations for each of its Project Areas, BOG will notify Veritas in writing of 1) the location and general outline of the specific Project Area, 2) the parameters to be utilized for the Project Area, 3) the equipment to be utilized for the Project Area, and 3) the approximate patch to be used for source and receiver lines within the Project Area. In no event, without BOG's prior consent, shall Veritas commence surveying in source and receiver locations more than thirty days prior to the date that field seismic acquisition operations are expected to commence for the Project Area. Following the notice described in this Section 2.4 and continuing until the field seismic acquisition operations for the applicable Project Area have been completed, BOG and Veritas shall stay in regular contact and utilize all reasonable efforts to continue to work with each other in their efforts to permit the lands that BOG desires to include in the Project Area and conduct the field seismic operations across all of the lands which BOG and/or Veritas are able to permit prior to the completion of such field seismic acquisition operations for the Project Area.


Section 2.5. Veritas 3-D Seismic Crew Commitment. During the Agreement Veritas hereby agrees to give BOG priority use of one Alliance Seismic Crew for the continuous conduct of 3-D Operations covering the Contract Mileage as provided in Section 2.2 above; provided, however, that Veritas agrees to utilize two Alliance Seismic Crews for the simultaneous conduct of field seismic operations for the first two Project Areas that are designated by BOG hereunder. Veritas shall commence field seismic acquisition operations for the first Project Area designated hereunder no earlier than July 1, 1997 and no later than July 21, 1997 and shall commence field seismic operations for the second Project Area designated hereunder no earlier than July 7, 1997 and no later than August 7, 1997. Following the commencement of field seismic operations for the first two Project Areas as described above, BOG shall make a reasonable effort to have Project Areas ready for surveying and field acquisition such that one Alliance Seismic Crew may go directly from the completion of 3-D Operations within one Project Area to the start of 3-D Operations for the next Project Area. As long as BOG has a Project Area ready for surveying and field seismic acquisition, Veritas agrees that the Alliance Seismic Crew will go from Project Area to Project Area without interruption unless and until such time as BOG does not have a Project Area ready for surveying and field seismic acquisition. In the event that BOG notifies Veritas that BOG will not have a Project Area ready for surveying in source and receiver points upon the completion of the current Project Area, Veritas shall make every reasonable effort to place the Alliance Seismic Crew on a third-party project area with as little stand-by time as possible incurred prior to the commencement of the next BOG Project Area. However, in the event that following the completion of 3-D Operations for a BOG Project Area the Alliance Seismic Crew is moved to a third-party project area as provided above, at BOG's request, Veritas will schedule the Alliance Seismic Crew to move to a designated BOG Project Area as soon as possible following the completion of the intervening third-party project areas which have been scheduled by Veritas prior to its receipt of BOG's notice. In the event that following the completion of 3-D Operations for a BOG Project Area a subsequent BOG Project Area is not ready for surveying and, despite Veritas' efforts to place the Alliance Seismic Crew on a third-party project area, the Alliance Seismic Crew experiences stand-by time, unless BOG has given Veritas at least sixty days advance notice, as provided below in this Section 2.5, that no Project Area will be ready, BOG shall compensate Veritas for stand-by time incurred by the Alliance Seismic Crew as follows (a) for the first three days of stand-by time BOG shall pay Veritas fifteen thousand dollars per day, and (b) for any stand-by time incurred after three days, BOG shall pay Veritas ten thousand dollars per day; provided, however, in no event shall BOG be required to pay Veritas more than four hundred fifty thousand dollars in total stand-by charges for stand-by time incurred between the completion of any one BOG Project Area and the commencement of the next succeeding BOG Project Area. Anything to the contrary contained herein notwithstanding, in the event that BOG gives Veritas at least sixty days advance notice that BOG will not have any Project Areas ready for field seismic acquisition, anything to the contrary contained in this Section 2.5 notwithstanding, BOG shall not be required to pay any stand-by time charges for any stand-by time that may be incurred by Veritas more than sixty days after Veritas' receipt of such notice. In the event that BOG gives Veritas sixty days notice that BOG will not have any Project Areas ready for field seismic acquisition, after such sixty day time period BOG shall not be responsible for stand-by charges, unless and until BOG gives Veritas written notice of a date by which BOG will have a Project Area ready for 3-D Operations


Anadarko Basin Seismic Operations Agreement II 4 5 and then BOG subsequently fails to have a Project Area ready for surveying within the time frame BOG has given Veritas. Any stand-by charges incurred pursuant to this Section 2.5 shall be invoiced by Veritas on a monthly basis and paid in full by BOG within thirty days of its receipt of an invoice correctly reflecting the amount of such charges.


Section 2.6. Veritas Option to Reduce Contract Mileage. In the event that, and only in the event that, Veritas has not received payments under Sections 3.4, 3.5 and/or 4.2 of the Previous Agreement totaling at least two million seven hundred thousand dollars ($2,700,000.00) on or before December 31, 1997, Veritas shall have the option to reduce the Contract Mileage to five hundred square miles (subject to increase by up to one hundred square miles to finish the last Project Area designated as provided in Section 2.5 above). To exercise the option described in this Section 2.6, Veritas must notify BOG in writing that it is exercising the option on or before 5:00 p.m. CST on January 15, 1998. In the event that Veritas has either (i) received at least $2,700,000.00 of total payments pursuant to Sections 3.4, 3.5 and/or 4.2 of the Previous Agreement prior to December 31, 1997, or (ii) Veritas fails to give the written notice described in this Section 2.6 on or before the 5:00 p.m. CST on January 15, 1998, then in either of such events, the Contract Mileage shall remain to be one thousand square miles (subject to increase by up to one hundred squar ...